Income Shocks Reduce Human Capital Investments : Evidence from Five East European Countries

This paper empirically investigates whether households affected by income shocks cope by reducing human capital investments. The analysis uses Crisis Response Surveys conducted in Armenia, Bulgaria, Montenegro, Romania, and Turkey during 2009 and 2...

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Bibliographic Details
Main Authors:	Dasgupta, Basab, Ajwad, Mohamed Ihsan
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ABILITY TO PAY ADVERSE EFFECTS AGGREGATE INCOME BANK POLICY BORROWING BUDGET CONSTRAINTS CAPITAL ACCUMULATION CAPITAL INVESTMENT CAPITAL INVESTMENTS CHILD HEALTH CREDIT MARKETS CRISES DENTAL CARE DEVELOPING COUNTRY DEVELOPING WORLD DEVELOPMENT ECONOMICS DEVELOPMENT OUTCOMES DISASTERS DOCTORS DUMMY VARIABLE DURABLE DURABLE GOODS ECONOMIC CRISES ECONOMIC REVIEW ECONOMIC STUDIES ELDERLY PEOPLE EMPIRICAL ANALYSIS EMPIRICAL FINDINGS EXPENDITURE EXPENDITURES FAMILIES FAMILY LABOR FINANCIAL CRISIS FINANCIAL MARKETS FINANCIAL SHOCK GOVERNMENT BUDGET HEALTH CARE HEALTH CARE CENTERS HEALTH CARE FACILITIES HEALTH CARE UTILIZATION HEALTH ECONOMICS HEALTH EFFECTS HEALTH EXPENDITURES HEALTH INSURANCE HEALTH INVESTMENTS HEALTH OUTCOMES HEALTH SERVICES HOSPITALIZATION HOUSEHOLD INCOME HOUSEHOLD INCOMES HOUSEHOLD SIZE HOUSEHOLD SURVEYS HUMAN CAPITAL HUMAN DEVELOPMENT INCOME INCOME COMPONENTS INCOME EFFECT INCOME SHOCK INCOME SHOCKS INFANT MORTALITY INFORMATION TECHNOLOGY INFRASTRUCTURE DEVELOPMENT INNOVATIONS INSURANCE INTERNATIONAL BANK INVESTMENT DECISIONS LABOR ECONOMICS LABOR MARKET LABOR SUPPLY LIFE INSURANCE LIVING STANDARDS LOCAL GOVERNMENT MARKET CONDITIONS MEAN VALUE MEDICAL CARE MEDICINES MORTALITY MORTALITY RATES NATURAL DISASTERS NORMAL DISTRIBUTION 0 HYPOTHESIS NUTRITION OPPORTUNITY COST PENSION POLICY DISCUSSIONS POLICY IMPLICATIONS POLICY RESEARCH POOR HOUSEHOLDS POST-CRISIS PERIOD PRIMARY EDUCATION PRIMARY HEALTH CARE PROBABILITY PUBLIC ECONOMICS REMITTANCES SAFETY SAFETY NET SAFETY NETS SENSITIVITY ANALYSIS SETTLEMENT SIGNIFICANT DIFFERENCES SOCIAL EXCLUSION UNEMPLOYMENT USE OF HEALTH SERVICES WAGES WITHDRAWAL WORKING HOURS
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111229165530 http://hdl.handle.net/10986/3695

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Summary:	This paper empirically investigates whether households affected by income shocks cope by reducing human capital investments. The analysis uses Crisis Response Surveys conducted in Armenia, Bulgaria, Montenegro, Romania, and Turkey during 2009 and 2010. A propensity score matching technique is adopted to compare health and education investment decisions among households that were affected by income shocks to the matched comparison group. The authors find that households affected by income shocks reduced some human capital investments. Interestingly, households in these five countries were more likely to adopt health-related coping strategies as opposed to education-related coping strategies. The results from Armenia, Bulgaria, Montenegro, and Turkey show that households affected by income shocks reduced their visits to doctors and reduced their spending on medicine and medical care significantly more than the matched comparison group. Households affected by income shocks reduced their education investments, but did not adopt harmful education-related coping strategies, such as withdrawing children from schools or moving children from costly private to cheaper public schools. These findings reveal that long-term and possibly intergenerational household welfare could be affected by short-run income shocks and hence underscore the need for governments to employ mitigation measures.

Income Shocks Reduce Human Capital Investments : Evidence from Five East European Countries

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